Court Discusses the Enforcement of Arbitration Agreements Signed on Behalf of Incompetent Nursing-Home Residents
Rhonda Stephan, as personal representative of the Estate of Bobby Gene Hicks, deceased v. Millennium Nursing and Rehab Center, Inc.
On December 15, 2017, Rhonda Stephan, as the personal representative of the Estate of Bobby Gene Hicks, filed a wrongful-death claim against Millennium Nursing and Rehabilitation Center. Stephan contends that Hicks, her father, died in 2015 while he was a resident at the Rehab Center. During Hicks's hospitalization at Crestwood Medical Center, Stephan signed all the paperwork, including an “Agreement to Alternative Dispute Resolution” (“the agreement”), arranging for her father to be discharged and transferred to the Rehab Center. The agreement provided that the parties should attempt to resolve any claims by mediation or, if the parties do not mediate, arbitration by written demand. On January 17, 2018, Millennium filed a motion to compel arbitration and to dismiss or to stay the proceedings pending arbitration, asserting that Stephan, by filing her complaint, had failed to comply with the terms of the agreement. The circuit court granted Millennium’s motion to compel arbitration.
On appeal, the Alabama Supreme Court noted that Hicks did not sign the agreement and that Stephan signed the agreement solely as a family member of Hicks. Stephan did not hold a power of attorney or other actual legal authority to act on Hicks's behalf or to contract. The Court agreed with Stephan’s argument that Hicks lacked the capacity to contract at the time the agreement was signed, and that Stephan did not have apparent authority to execute the agreement on his behalf. The Court further noted that Stephan’s affidavits demonstrated her personal knowledge that Hicks suffered from episodes of confusion and loss of cognition and was unable to comprehend writings or attend to financial matters. Thus, the Court found that at the time Stephan signed the paperwork for Millennium in preparation for his transfer, Hicks did not have “sufficient capacity to understand in a reasonable manner the nature and effect of allowing Stephan to agree to the arbitration provision." Further, the Court recognized the distinction between arbitration agreements signed on behalf of incompetent nursing-home residents and those signed on behalf of competent residents in light of the doctrine of apparent authority. The Court concluded that Stephan lacked apparent authority and, thus, was not bound to the arbitration provision, because Stephan signed the agreement in her capacity as Hicks's relative or next friend, and not as Hicks’ legal representative. Therefore, the Alabama Supreme Court reversed and remanded the circuit court’s order granting the motion to compel arbitration.